question 5

We are evaluating a project that costs $757,000, has a life of eight years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 123,000 units per year. Price per unit is $40, variable cost per unit is $27, and fixed costs are $770,626 per year. The tax rate is 23 percent, and we require a return of 21 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 20 percent. a. Calculate the best-case NPV. b. Calculate the worst-case NPV